INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESS;Breaking The Swiss Banking Silence

By JOHN TAGLIABUE

Published: June 4, 1996

PALERMO, Sicily—
Success in Swiss affairs often seems to hinge on organized vagueness and abstraction, so much so that a public figure who will have nothing to do with either can appear to be an enemy of the system.

Hence the mixed reception afforded Carla del Ponte, Switzerland's chief federal prosecutor. Mrs. del Ponte, 49, took office in 1994 as part of a drive to restore trust in the judicial system after a run of scandals. But she has been identified in the public eye as an overreaching crusader against money laundering, the leader of what in Switzerland is considered an uncharacteristically blunt campaign to make it unprofitable for drug lords, deposed dictators and crooked business people to use the country's vaunted bank secrecy to mask the movement of dirty money.

When Mrs. del Ponte appears at international conferences on organized crime, like the one that took place here in May, she is a sought-after celebrity. People like Louis Freeh, director of the Federal Bureau of Investigation, refer to her as a "dear friend and colleague."

Back home, though, her outspokenness has earned her the opposition of powerful lobbies, including that of the banks, who fear for their business. Detractors suggest Mrs. del Ponte is bent on amassing power; others say she blinds the public eye with grand pronouncements about blows against organized crime that are rarely backed up by convictions.

Whatever the final verdict on her effectiveness, Mrs. del Ponte is part of a movement, as ineluctable, if at times as imperceptible, as an Alpine glacier, to cleanse the Swiss banking system of suspicious money.

Great strides have been taken. Recent legislation, for example, allows the banks to breach secrecy in cases where they suspect skulduggery. Within the law's first year, 26 cases came to light just in the banking capital, Zurich, leading to prosecution in 9 of them. Many bankers argue that enough has been done.

But the banks, Mrs. del Ponte says, should be required, not just allowed, to report dirty money. And Switzerland, she says, should classify tax evasion, not just tax fraud, as a crime, since some large deposits are from foreigners evading tax collectors at home.

She also wants regulatory legislation to cover financial services other than banks, like fiduciaries and asset managers, who are often hired to open accounts through which money is laundered, thus providing a screen for the source of the money.

Implicitly, at least, the banks' resistance to change reflects concern for the future of their business. For the present, it could hardly be better. Profits at the three largest banks -- the Union Bank of Switzerland, Credit Suisse and the Swiss Bank Corporation -- soared last year, after a slow 1994. As Europe's single currency approaches, people with heavy investments in German marks worry that the future Eurocurrency could be less stable than the mark and are turning to Swiss franc investments, confirming Swiss financial might, made all the more alluring because of the country's decision not to join the European Union.

Still, the banks' image has suffered in recent years.

When Mexico's former President Carlos Salinas de Gortari fell into disgrace, about $130 million was found in Swiss accounts tied to his brother, Raul, with some of the money thought by Swiss authorities to stem from drug trafficking. When Italy's political and business class was shaken by disclosures of corruption in the early 1990's, the flow of bribes could be traced through banks in Switzerland. And with the spread of organized criminality in Eastern Europe, Swiss bankers themselves wisecrack about Russian businessmen arriving in Zurich with suitcases full of dollars.

To complicate matters, recent attacks have come from Jewish organizations over the handling of accounts left by victims of the Holocaust. Though the banks recently agreed to unfettered auditing to determine how much of this money exists, they did so only after threats of hearings before the Senate Banking Committee in Washington.

Elan Steinberg, executive director of the World Jewish Congress, which helped negotiate the agreement, complains that some Swiss bankers believe bank secrecy "came down from Mount Sinai" and that breaching it is "almost a religious violation."

Thus, while Mrs. del Ponte may have appeared a bit blasphemous to some Swiss when she took office two years ago, for others she seemed the ideal person to restore the reputation of a battered justice system.

The battering began in 1989, when the Justice Minister, Elisabeth Kopp, was forced to resign when she tipped off her husband that a company with which he was associated was involved in a drug investigation. Though Mrs. Kopp was later cleared of any illegality, an investigating commission discovered that for decades hundreds of thousands of dossiers on ordinary citizens had been illegally assembled by the domestic intelligence service.

By the early 1990's, the Government was casting about for someone with an unblemished reputation to restore public confidence. Mrs. del Ponte got the nod.